Often times after a radio show or podcast has become popular there is a desire to release a book and How I Built This fits into the pattern. There is a podcast called How I Built This by Guy Raz which resulted in a book published by Houghton Mifflin Harcourt, NY, 2020. The podcast is Guy Raz interviewing entrepreneurs about their journey to become successful. In the book, Mr. Raz groups the answers into categories and as a journalist adds stories around the theme of the chapter.

In all cities, everyone is drawn to the office towers with the names of corporate clients and that is a good thing. It is good for the city for tax revenues, it is good for the office developer to collect rents on a consistent basis, and it is good that companies can grow and become part of many consumers lives. As investors we are often attracted to the big names, and it is a good place to start.

In the book, there is the example of San Francisco and the California gold rush. Hundreds of thousands of people travelled to California by ships and wagon trains. After California became a state, the railroads were built. Gold fever brought in many people and most did not find gold to change their lives, although some did. However, there were other opportunities.

Levi Strauss did not find gold, but he did open a store selling dry goods. One of his customers, a tailor figured out a way to fashion metal rivets on the pocket and zipper of the denim. Levi fronted the tailor money to file patents on the new design and both became millionaires. Many of us buy Mr. Stauss’s jeans to this day.

There is an old book, but well worth the read called the Millionaire Next Door, if you go to the industrial part of your city, you can look in the parking lot of a HVAC company and count the trucks, consider the inventory in the truck, the inventory in the plant and you will soon see the owner has over a million in assets. There is money to be made that may or may not be in the shiny office towers of downtown.

Another example is Chet Pipkin of Belkin International which is a consumer electronics maker. Mr. Pipkin first thought about being a PC maker but there was too much competition. Instead, he found his niche by immersing himself in the scene and hanging out at computer store. What he watched was people buying the PC and then asking how do I make this work? it was a very good question because at the time, there were many different manufacturers with different connectors on them, it was difficult task to do until you had done it enough times. There was a niche market.

Why did not IBM fill in? because they had their hands full making enough PCs. For years they did not concern themselves with how the printer was connected and by who? Belkin was small enough to take advantage of this niche and was not a threat to IBM because it was small. Belkin help make the standards because their goal was to make more PCs work with more peripheral devices for more consumers. Eventually the business was sold for $800 million.

Linking to dividend paying stocks, it is important to start with the big shiny company that is in the media that you read, however it is almost important to remember money is money. Sometimes you can find a relatively smaller company what is profitable and can pay dividends and has a healthy market share in its niche. There is always competition but niche markets can be similar to near monopoly aspects of ability to raise prices to maintain margins. This is why you need to do your homework and trying to discover the diamonds in the rough.

There are more questions than answers, till the next time – to raising questions.